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Tax Publishers ACIT v. Gepach International [ITA Nos. 5943 & 5942/Mum/2018, dt. 15-9-2020] : 2020 TaxPub(DT) 3772 (Mum-Trib) Claim of reimbursement -- Not hit by section 40(a)(i) read with section 195 *Facts:* Assessee had contracted with a Free Trade Zone UAE entity to whom amounts were reimbursed for sales promotion expenses for their Russian business. The UAE entity was supposed to solicit sales orders and market the products of the assessee in Russia for which the expenses the other spends were reimbursed by the assessee. These so-called reimbursements were subjected to disallowance under section 40(a)(i) read with section 195 as technical, commercial and managerial services. On higher appeal the Commissioner (Appeals) allowed the claim of the assessee. Aggrieved revenue went in higher appeal to ITAT. Held in favour of the assessee that the amounts were reimbursements with no profit element behind the same. Besides that, these being sales promotion akin to overseas commission agent were outside the scope of section 195. *Editorial Note:* The number of decisions cited here in the verdict make it an interesting reading especially if one were to canvas the logic of reimbursements in the cross-border TDS domain. It is to be noted of the structure adopted by the assessee as well the entity with whom they had contracted was in a FTZ in a zero-tax jurisdiction like UAE outside India. Thereby spending for Russia would have also not been that difficult with free flow of forex possible.

Tax Publishers

ACIT v. Gepach International [ITA Nos. 5943 & 5942/Mum/2018, dt. 15-9-2020] : 2020 TaxPub(DT) 3772 (Mum-Trib)

Claim of reimbursement -- Not hit by section 40(a)(i) read with section 195

Facts:

Assessee had contracted with a Free Trade Zone UAE entity to whom amounts were reimbursed for sales promotion expenses for their Russian business. The UAE entity was supposed to solicit sales orders and market the products of the assessee in Russia for which the expenses the other spends were reimbursed by the assessee. These so-called reimbursements were subjected to disallowance under section 40(a)(i) read with section 195 as technical, commercial and managerial services. On higher appeal the Commissioner (Appeals) allowed the claim of the assessee. Aggrieved revenue went in higher appeal to ITAT.

Held in favour of the assessee that the amounts were reimbursements with no profit element behind the same. Besides that, these being sales promotion akin to overseas commission agent were outside the scope of section 195.

Editorial Note: The number of decisions cited here in the verdict make it an interesting reading especially if one were to canvas the logic of reimbursements in the cross-border TDS domain. It is to be noted of the structure adopted by the assessee as well the entity with whom they had contracted was in a FTZ in a zero-tax jurisdiction like UAE outside India. Thereby spending for Russia would have also not been that difficult with free flow of forex possible.